 Growth or decline of comparative advantageJournal of Macroeconomics, 2013, vol. 38, issue PA, 12-18 Abstract: The question here is whether the dynamic effects of opening to trade will increase or decrease comparative advantage. When comparative advantage is based on the abundance or scarcity of something that is costly to acquire, one expects rational behavior to respond to a change in prices by increasing that abundance or scarcity. To explore this issue in simple theoretical terms, this paper examines two types of simple growth model – a Solow Model with proportional saving, and a Ramsey model with optimal saving – to see whether this reasoning is born out. In the Ramsey model, it is. In the Solow model, on the other hand, results vary, but this should not be surprising, as the proportional saving assumption does not embody optimizing behavior. To the extent that we believe that aggregate saving behavior is indeed based on rational and fully informed optimization, we should therefore expect that the dynamic effects of trade do indeed operate in the direction of increasing comparative advantage over time. Keywords: Comparative advantage; Dynamic trade models; Trade and growth (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:38:y:2013:i:pa:p:12-18 DOI: 10.1016/j.jmacro.2013.08.020 Access Statistics for this article Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos More articles in Journal of Macroeconomics from Elsevier |
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